Stock scam suspect gives up

Edward Iwata, OF THE EXAMINER STAFF

Published 4:00 am, Tuesday, August 3, 1999

1999-08-03 04:00:00 PDT SAN FRANCISCO -- A former analyst for Morgan Stanley Dean Witter & Co. who had fled arrest by federal agents turned himself in Tuesday morning at FBI headquarters in San Francisco, an FBI official said.

The suspect, 25-year-old Brett S. Henderson of San Francisco, was wanted on insider trading charges. He fled out the back of his girlfriend's house as agents tried to arrest him Monday morning, according to a government official close to the case.

"He saw the error of his ways and walked into our office on Golden Gate Avenue," FBI spokesman George Grotz said Tuesday.

Henderson appeared Monday before federal magistrate Phyllis Hamilton and was released on a $50,000 signature bond, Grotz said. His preliminary hearing is set for Aug. 23.

Authorities Monday arrested his friend - Richard F. Randall, a 27-year-old high school teacher - early Monday in Urbana, Ohio.

In a criminal complaint filed in U.S. District Court in San Francisco, the U.S. attorney accuses the two men of conspiracy to engage in insider trading, said Leslie Caldwell, the U.S. attorney's chief of economic crimes. If convicted, they face a maximum sentence of five years in prison and fines up to $250,000.

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In the same venue, a civil complaint filed by the U.S. Securities and Exchange Commission charges Henderson and Randall with illegal insider trading. The complaint seeks the return of their trading profits and penalties up to three times their profits.

"These young men began their professional careers by taking calculated advantage of access to highly confidential information for their own financial benefit," said Helane Morrison, the SEC's enforcement chief in San Francisco.

Henderson and Randall could not be reached for comment Monday.

Henderson used pay telephones and disposable calling cards to tip off Randall with confidential information on upcoming corporate mergers involving high-tech firms that were Morgan Stanley clients, according to the court filings.

Last November, for instance, Henderson overheard conversations among Morgan Stanley co-workers that America Online Inc. was about to buy Netscape Communications Corp., according to the court filing.

Henderson allegedly leaked the information to Randall, who quickly bought 350 shares of Netscape at $28 a share.

The next day, the media reported that AOL and Netscape were in merger talks. Netscape's stock jumped 34 percent, and Randall sold his shares at $43.75 for a $5,512 profit, according to the complaint.

The alleged scheme fell apart after an employee in Morgan Stanley's Menlo Park office, where Henderson formerly worked, found an ETrade brokerage account statement in the name of Randall on a photocopy machine, according to an affidavit signed by FBI agent Clayton Smith.

The employee grew suspicious because the transactions highlighted on the brokerage statement all involved Morgan Stanley's corporate clients or acquisition targets, the affidavit states.&lt;